A guide to life insurance for over-50s
This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincoln or other local offices.
For someone in their 50s or over, a whole-of-life insurance policy is often an attractive option for protecting your financial plan. It provides a tax-free lump sum to your loved ones, in the event of your death, which could be used as a financial gift or means to pay certain bills or costs (e.g. a funeral). One particular policy tends to catch attention – the over-50s’ plan.
In this guide, our financial advisers here at Castlegate in Grantham offer some thoughts on how over-50s can approach life insurance – especially some of the key issues to navigate. We hope you find value in this content. If you would like to discuss any of these matters or discuss your own financial plan with us please get in touch to arrange a no-obligation financial consultation, at our expense:
What is an over-50s plan?
One of the harsh realities of many life insurance plans is that they often get more expensive the older you become. If you have a pre-existing health condition, you smoke or are considerably overweight, moreover, then this can increase the likelihood that you may need the payout, which accordingly leads the insurer to hike the premiums.
This is an important reason why over-50s plans catch people’s eyes. According to the marketing content on one website, for instance, such plans are advertised as “no medical required” and promises that “acceptance is guaranteed”. They are also available to all UK residents aged 50 to 80. Many of these offers can seem too good to be true, appearing to be very low-cost (e.g. perhaps £8 per month) and promising a fixed sum to your loved ones upon your death.
Be very careful, however, before jumping into a plan like this. Consult your financial adviser first, as things may not be what they seem. First of all, many of these plans require that you keep on paying into them until your death. If you later decide that you want to cancel or change the plan, it will be very difficult if not impossible to do so. It also, therefore, carries the possibility that you may eventually end up paying more into the policy than you get out of it as a lump sum.
Suppose, for instance, that you decide to take out an over-50s policy which promises to pay out £1,400 when you die. It costs £8 per month. If you divide the total amount by the monthly cost, then you end up with 175 months – i.e. just over 14 years. So, if you took the policy out at age 50 and lived past age 64, you’d likely end up paying much more into the plan that you get out.
Remember, too, that inflation will erode the value of the eventual payout. So £1,400 in today’s money will likely be worth less in 14 years’ time.
However, there are circumstances where a policy like this may work for you. Put bluntly, if you have a very high chance of dying before your average life expectancy. If you’re 68, for instance, and you only expect to live to age 70 (due to a medical condition), then you could take a gamble on an over-50s policy and potentially make a huge gain. We recommend that you speak to your financial adviser, however, if you are tempted by this option. Bear in mind that it is likely to not be in your best interest.
Other life insurance options for over-50s
A range of factors can affect whether or not you need life insurance in your 50s, and what type might be best for you. If you are in your 80s, for instance, your risk of ill health gets significantly higher and so term life insurance (which covers you for a fixed period) often becomes less viable. Yet for another individual, term insurance might be the more affordable and sensible option – especially if you are younger and in good health.
It will be important to discuss with your financial adviser about how your insurance might feature in your plans for your inheritance tax (IHT) bill and funeral expenses. If you’re looking to use the former to help settle the latter two, then a whole-of-life policy might be more appropriate, even if it may be more costly than a term insurance policy. Bear in mind that not everyone may need a life insurance policy to cover their anticipated IHT liability. Yet if you are considering using a life insurance policy in this way, be careful to seek professional advice to ensure that the payout is not inadvertently included within the value of your estate (thus making it liable to IHT as well!).
Conclusion & invitation
Life insurance for over-50s can be a complex and intimidating subject for people to consider. Yet it’s an important area to consider for your financial plan, and fortunately, help is at hand to assist you with navigating the key issues and options which need consideration.
If you are interested in discussing your own financial plan or protection strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense: